Tuesday, January 5, 2016

Oil companies getting in a big heap of trouble...

Big Oil and the small oil extraction companies too are getting in a heap of trouble. Big Oil is in scandal over dissassembling the truth over Climate Change while they KNEW the truth, and both Big Oil and the small fry are in trouble over their debts. The latter troubles do not bode well for the oil companies when the supply tightens up again, because of investors issues with the companies' debts that went bad before that point in the future.

Tips o' th' hat to Abel Adamski, Apneaman[1] [2],  Griffin, Ryan in New England, Robert Scribbler [1], [2]dtlange, and  of The Automatic Earth.

Big Oil braced for global warming while it fought regulations
By Amy Lieberman and Susanne Rust of the LA Times
Dec. 31, 2015 Link

“A few weeks before seminal climate change talks in Kyoto back in 1997, Mobil Oil took out a bluntly worded advertisement in the New York Times and Washington Post.

“Let’s face it: The science of climate change is too uncertain to mandate a plan of action that could plunge economies into turmoil,” the ad said. “Scientists cannot predict with certainty if temperatures will increase, by how much and where changes will occur.”

One year earlier, though, engineers at Mobil Oil were concerned enough about climate change to design and build a collection of exploration and production facilities along the Nova Scotia coast that made structural allowances for rising temperatures and sea levels.

The problem is it’s not just AGW-Deniers and Republicans. It’s pretty much the entire political apparatus. Congress puts poison pills in must-pass bills and Obama signs off on them. Every. Fracking. Time.

During Paris Climate Summit, Obama Signed Exxon-, Koch-Backed Bill Expediting Pipeline Permits
By Steve Horn of Desmog Blog
December 31, 2015 Link

Just over a week before the U.S. signed the Paris climate agreement at the conclusion of the COP21 United Nations summit, President Barack Obama signed a bill into law with a provision that expedites permitting of oil and gas pipelines in the United States.
The legal and conceptual framework for the fast-tracking provision on pipeline permitting arose during the fight over TransCanada's Keystone XL tar sands pipeline. President Barack Obama initially codified that concept via Executive Order 13604 — signed the same day as he signed an Executive Order to fast-track construction of Keystone XL's southern leg — and this provision “builds on the permit streamlining project launched by” Obama according to corporate law firm Holland & Knight.

That 60-page streamlining provision falls on page 1,141 of the broader 1,301-page FAST (Fixing America's Surface Transportation) Act (H.R. 22 and S. 1647), known in policy wonk circles as the highway bill. The provision is located in a section titled, “Federal Permitting Improvement.”

And right after, he lifted the export ban. Big Oil didn't take long exploiting it, either. First ship was already on the way on December 31st.

First U.S. Oil Export Leaves Port; Marks End to 40-Year Ban

The first U.S. shipment of crude oil to an overseas buyer departed a Texas port on Thursday, just weeks after a 40-year ban on most such exports was lifted.

The Theo T tanker has left NuStar Energy LP’s dockside facility in Corpus Christi, Texas, along the western shore of the Gulf of Mexico, Mary Rose Brown, a spokeswoman for NuStar, said in an e-mail. The ship is carrying a cargo of oil and condensate to Italy from ConocoPhillips’s wells in south Texas that was sold to Swiss trading house Vitol Group.

A campaign by oil explorers including Continental Resources Inc., Chevron Corp. and Exxon Mobil Corp. to lift the 1970s-era export prohibition culminated in a Dec. 18 congressional decision to end the ban.


Well whaddya know! Lots and lots and lots of oil can be materialised into existence using accounting parlor tricks! And then disappeared when the tricks are corrected. The investors and creditors won't won't be happy, tho'.

Billions of Barrels of US Oil Set to Disappear. Poof
Tom Lewis of The Daily Impact Link

In a few weeks, several billion barrels of American oil will vanish in an instant. (I am not making this stuff up: the headline is right there on Bloomberg Business, hardly a chicken-little medium.) This is — shortly to be was — the oil that just a few months ago (Remember? When we were young, and happy?) was to return us to energy independence, to make us the number one oil producer in the world, to bring the happy days here again for good. 

But much of that oil is about to disappear, not with the boom of an oil-train explosion or deep-well blowout or terrorist bomb, but with the quiet click of a computer mouse. And this time it’s not (as it often has been before) the Energy Information Administration revising downward a previous guess about oil reserves.   

As the American shale-oil boom, a.k.a. American Oil Revolution, was accelerating back in 2009, the Masters of the Oil Universe demanded and got an accommodation from the Securities and Exchange Commission: it was made easier for the oil companies to claim as hard assets, for purposes of valuing their companies and borrowing money, the value of all the oil they estimated to be “in reserve,” which is to say lying somewhere under the ground they had under their control.

The oil companies’ estimates of their own “proven reserves” were astronomical, of course. In the careful words of one expert observer, David Hughes, “There was too much optimism built into their forecasts.” Translation: They lied.

Richard Heinberg gives a presentation here that focuses on the false promises of fracking, and how since the mid-2000s the major oil companies have invested tens of billions in expanding oil production without hardly any increase in the amount extracted. They are seeing rapidly diminishing returns, and need to maintain production levels. It’s why there is so much fracking and digging up of tar sands and drilling in the deepwater ocean and the Arctic. The low-cost, easy-to-get oil is depleting now but our dependency on oil remains.

Robert Scribbler has this to say about Prof. Heinberg's conclusions:

The old, cheap oil is a diminishing fraction of current production. Growth comes from the expensive unconventional a which is one major reason why we have so many companies facing bankruptcy. From the point of view of strategic use of money to reduce future carbon emissions, now is prime time for divestment. But given a still general lack of strong government policy, the energy markets will face a long series of shocks as a result. Laissez faire again and the result is mass malinvestment in fossil fuels and assets stranded in wave after wave.

And as the floods come down the Mississippi like a million tractor trailers barreling down the Mass. Pike, Exxon is able to close a refinery to minimize flood damage in Memphis due to lack of demand because of the weird, warm weather we've been having. The weird, warm weather that's being caused by too much Carbon Dioxide in the atmosphere due to combustion of fossil fuels, particularly coal and oil.

Southern states brace for surging Mississippi River flooding
By Victoria Cavaliere of Reuters
Additional reporting by Daniel Wallis, Erwin Seba, Justin Madden and Mary Wisniewski
Bernard Orr and Tom Brown, eds.
Fri Jan 1, 2016 Link

Officials in Louisiana are checking levees daily, and Exxon Mobil Corp has decided to shut its 340,571 barrel-per-day refined products terminal in Memphis, Tennessee, as floodwaters threatened to inundate the facility just south of the city’s downtown.

“All that water’s coming south and we have to be ready for it,” Louisiana Lieutenant Governor-Elect Billy Nungesser told CNN. “It’s a serious concern. It’s early in the season. We usually don’t see this until much later.”

And Robert Scribbler finds it "very ironic and more than a little disturbing that the same oil companies that have been shoring up their own infrastructure to deal with climate change keep blocking policies that are now much needed to prevent damage to an undefended public."

Of course, the falling oil prices are going to force oil companies big and small to cut costs any way they can, or face defaults on their debts. We should expect plenty of oil company defauts and bankruptcies in 2016 which could potentially shut-in a lot of oil reserves underground (good news for Climate Change!) due to investors, including big banks, who were once bitten and will be twice shy.

Oil drops 31% in 2015 on global crude glut
By William Watts and Jenny W. Hsu
Dec 31, 2015 Link

Oil futures ended higher Thursday in the final trading session of 2015, but posted a steep annual drop for the second year in a row as markets continue to wrestle with a global glut of crude. On the New York Mercantile Exchange, light, sweet crude futures for delivery in February rose 44 cents, or 1.2%, to finish at $37.04 a barrel. For the year, the U.S. benchmark dropped 30.5% and has lost 62.4% over the last two years. Crude hadn’t dropped two years in a row since 1998. February Brent crude, the global benchmark, rose 82 cents, or 2.3%, on London’s ICE Futures exchange to settle at $37.28 a barrel. Brent fell 35% in 2015, marking its third straight yearly drop. Oil trimmed gains somewhat after oil-field services firm Baker Hughes said the total number of U.S. oil rigs fell by two this week to 536.

Oil’s bounceback on Thursday likely reflected some short covering ahead of year-end and a three-day weekend, said Phil Flynn at Price Futures. U.S. markets will be closed Friday for the New Year’s Day holiday. Flynn said traders might be nervous about maintaining short positions amid rising tensions within Iran that could threaten the implementation of a nuclear accord that was expected to result in the lifting of sanctions that have prevented the country from exporting oil. Iran’s president has ordered his defense minister to expedite the country’s ballistic missile program following newly planned U.S. sanctions, he said Thursday, according to The Wall Street Journal. With U.S. production “growing for the last few weeks and global inventories being near storage limits, this is yet another reminder that the supply glut could take a long time to clear, which may mean even lower oil prices in the near term,” said Fawad Razaqzad at Forex.com.


Looks like we'll be in interesting times!

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